Profits from Peace: The Political Economy of Power-Sharing and Corruption

F Haass, M Ottmann

Abstract

Does power-sharing drive corruption in post-conflict countries? We conceptualize government elites in any post-conflict situation as rent-seeking agents who need to ensure the support of their key constituencies to remain in power. Power-sharing institutions-especially cabinet-level, executive power-sharing institutions-systematically shape these rent-seeking motives. Power-sharing cabinets create political coalitions dominated by small circles of government and rebel elites with direct access to state resources and low levels of loyalty toward the government leader. Also, the provisional nature of many power-sharing institutions increases rent-seeking incentives: facing a limited time horizon in office, rent-seeking elites within the power-sharing coalition are likely to capture as many rents as possible before they have to leave office. Thus, post-conflict countries with power-sharing institutions should exhibit higher aggregated levels of rent-seeking measured as the level of corruption in a country. In a statistical analysis of all post-conflict situations during 1996-2010, we find that power-sharing cabinets substantively increase corruption in post-conflict countries and that this effect is stronger in the presence of natural resource rents. These findings add quantitative evidence to the debate about drivers of post-conflict corruption. Moreover, they highlight a trade-off between short-term stability and long-term negative effects of corruption for post-conflict political and economic development.